Standing Committee F

[Mr. Roger Gale in the Chair]

Finance Bill

(Except clauses 4, 19, 23, 26 to 29, 87 to 92, 131 and 134 and schedules 1, 5 and 38) - Clause 132 - Mandatory e-filing

Amendment proposed [this day]: No. 227, in page 104, line 7, leave out 'requiring' and insert 'permitting'.—[Mr. Bercow.]  
Question again proposed, That the amendment be made.

Roger Gale: I remind the Committee that with this we are taking the following amendments: No. 228, in page 104, line 38, leave out 'or requirement'.
 No. 229, in page 104, line 41, leave out 'or requirement'. 
 No. 254, in page 105, line 9, leave out 'required' and insert 'permitted'. 
 No. 231, in page 105, line 20, leave out subsection (7).

Dawn Primarolo: I was speaking to the group of amendments and I had started to make a detailed response to amendment No. 231. To recap, amendment No. 231 would mean that the regulations made under the clause could not provide for a penalty to be charged where an employer did not comply with the requirement to send their return electronically. The regulations made under these powers will require employers to send certain returns electronically and require those returns to meet the quality thresholds. Earlier, we discussed quality thresholds that are providing for the information that legislation, and the Inland Revenue, require to comply with the pay-as-you-earn regulations.
 Regulations cannot be effective without some form of sanction for those who fail to comply. That is the experience of this Government and Treasury Ministers; the Conservative Government reached the same conclusion. Employers have the choice of sending their returns electronically themselves or using an intermediary, such as a payroll bureau, so no-one should have to pay a penalty. As I said this morning, we are paying a fee to encourage employers to make that transition. 
 Where a non-electronic or substandard return is submitted, the clause will allow the Inland Revenue to provide in the regulations either to treat the return as not made or to charge a fixed penalty. The amount of any fixed penalty will be linked to the employer's size, which is normal procedure. The clause sets an upper limit of £3,000 for penalties and, in line with normal practice, only the most serious failures would attract 
 the maximum penalty. The actual amounts of the penalty for each category of employer size will be specified in the regulations; the practice is well known.

John Bercow: The Paymaster General is seeking to justify the regulations, but to many of us it seems that the regulations in their proposed form, if they are to reflect the terms of the clause, will represent a triumph of Sir Humphrey at his most zealous. Perhaps I am being a trifle cynical, but can the hon. Lady tell me, as an earnest of good intentions and of her understanding of what is likely to follow, how we are to interpret in subsection (3) the words
''provision for the application of conclusive or other presumptions''?
 What does it all mean?

Dawn Primarolo: It means the same as is already operational in the tax system and the same requirements that are applied now with regard to the obligations of employers to make PAYE returns. I understand that the hon. Gentleman may be a little cynical, but I cannot understand why it is something that the Committee should consider in a cynical vein when the Government provide for a direct payment to encourage employers in a matter that employers have identified as having high compliance costs, and are prepared to invest in payment to assist the employer to make those returns electronically.
 The clause provides for the same provisions to apply for electronic transmission as for the current paper submissions that can be made by employers. That goes to the heart of the hon. Gentleman's points. He wants employers to be able to choose whether to file electronically for PAYE, whereas the Government wish all employers to do so, after a period of time and investment. To remove the penalties would render the clause useless—which is the hon. Gentleman's intention in moving the amendment. The Government reject it and ask the Committee to do so. Our objective is to move to electronic filing by 2010. It is staggering that in this day and age, with the speed of developments in e-commerce, members of a Committee of the House would declare that they do not wish to assist employers to move to electronic filing or provide the investment necessary to achieve that.

Peter Luff: That is ridiculous!

Roger Gale: Order.

Dawn Primarolo: In this day and age, when faster and better methods of communication exist, the Opposition wish to stick to paper—and presumably, if they could, to the pony express.

Peter Luff: Will the Minister give way?

Dawn Primarolo: In a moment.
 I ask members of the Committee to reject the amendment.

Peter Luff: The hon. Lady does not understand that although legislation that assists employers to achieve honourable objectives that the Government wish them to embrace is welcome, legislation that compels them to do so is not. There is a world of difference between
 those two concepts. Cannot the Minister understand that simple point?

Dawn Primarolo: The hon. Gentleman fails to understand that the Opposition parties wish us to maintain a system—simply because they do not want modern technology—that will not deliver the objectives that business says it wants: clean data, speedy service, accurate information from the Revenue, and the eradication of confusion and delay.

Michael Jack: Will the hon. Lady tell us which member of the Opposition has opposed in principle the use of electronic filing?

Dawn Primarolo: The Opposition wish to prevent the crucial part of the equation that would enable the efficient working and delivery of electronic filing, and the reduction of compliant costs: the requirement to file electronically. They want the ends but do not want to provide for the means—that is typical of many Opposition speeches.

John Burnett: Is it the hon. Lady's view that everyone, without exception, should have to file electronically?

Dawn Primarolo: The vast majority of people should be required to file electronically for their PAYE returns. [Interruption.] The hon. Gentleman tempts me into discussing an amendment that has yet to be moved; I accept that it may be possible to vary that requirement in special circumstances for a very limited number of people. However, electronic filing of PAYE for the overwhelming majority of people by 2010 is not an unrealistic target. It would be unacceptable not to use the best technology in this modern age to improve delivery of service.

Howard Flight: I thank the Paymaster General for giving way. I hope that exchanges will not become acrimonious where she does not agree with me. My hon. Friend the Member for Buckingham (Mr. Bercow) and I referred to her letter, which clearly stated that the Government did not intend to force, require or oblige people to file electronically. What happened to that? There has been a sudden change. As most of us made clear, some 95 per cent. of businesses are likely to want to use electronic methods to file their returns. It is therefore balderdash that not making it compulsory will wreck the project. Will the Paymaster General say how she has reconciled stated Government policy some 18 months ago with today's volte-face?

Dawn Primarolo: If there is no problem with everyone filing electronically, the hon. Gentleman has already answered his own question. Nor will he be worried about the requirement for it all to be completed by 2010 because, according to him, it will happen.
 With regard to the letter to my right hon. Friend the Member for Leicester, West (Ms Hewitt) in 2000, I am comfortable with the proposition. People have two options. They can file their returns personally using the software on the Inland Revenue website that has been available for some time. If they do that, they will still 
 receive a payment from the Inland Revenue over the five-year period, which they will be able to use to invest further in their software to improve their business. If people do not want to do that, we now provide an intermediary for them to use, which many people already do. Again, there will be a direct payment to assist in the transfer to using the intermediary. The software can be very simple, and will speed up, not slow down, the processes that businesses must undertake on PAYE.

John Bercow: Will the Paymaster General give way?

Dawn Primarolo: I will be happy to give way to the hon. Gentleman in a moment.
 I cannot see why our target of 2010 is unrealistic, given the vast growth in the use of computers and the internet, and the clear business improvements that can be gained from them.

Roger Casale: I am sure that the Paymaster General is as surprised as I am that so many Opposition Members seem to be ready to go to the stake over what they regard as the inviolable right of business people not to file their tax returns by e-mail. Will the Paymaster General confirm that just as the Inland Revenue has the right to require proper tax returns from business people, so it must have the right to say how it wants those returns presented? After all, people are compelled to use a paper form, and in future they will be required to use e-mail. What is wrong with that?

Dawn Primarolo: I gave way to my hon. Friend, so perhaps I should give way to the hon. Member for Buckingham.

John Bercow: I do not agree with the hon. Member for Wimbledon (Roger Casale), although in view of the stoical service that he gives on the Committee from the Back Bench, I say to him in a genuine spirit that it is time that he got his reward and was put on the Front Bench.
 The way in which the Paymaster General dangles the carrot of the entitlement to use an intermediary is ultimately unpersuasive. The point has been made to me repeatedly that if someone opts to use an intermediary rather than to file personally, he or she will still be required to have an e-mail address. Does she not recognise that? Some of the people who object most strenuously to the clause do so to the idea that they should have to use e-mail, even if only indirectly, when they do not wish to do so.

Dawn Primarolo: The intermediary provisions, which allow returns to be made on an employer's behalf, are no different from the current arrangements. Intermediaries already file information electronically, and we want to move to a situation in which all the information arrives in that way. I accept that we do not yet have the provisions concerning the move to require electronic filing for all submissions by 2010.
 It will be necessary, following on from the Carter review and the fact that the Government put the review out to further consultation—[Interruption.] The idea that there was a huge clamour of horror from all businesses saying that they did not want the change is 
 not correct. There was a request about the drafting of the regulations and agreement on the areas covered by them, and that will be subject to further discussions. In 2004–05, we shall start the process of paying over the five years the £420 million that we are prepared to invest to help small businesses to move to electronic filing. 
 All the amendments are designed to prevent the requirement for filing to occur electronically by 2010. I understand Opposition Members' objections, but I simply do not agree with them, and I ask my hon. Friends to reject the amendments if they are put to a vote. Following some of the points that have drifted into this debate, perhaps the debate on the next amendment will be a suitable forum in which to clarify the issue of exceptions, should any be needed, to the regulations.

John Bercow: As you know, Mr. Gale, and the Committee can confirm, I am as open-minded as any hon. Member. I am always willing to be persuaded of an argument and, at the risk of embarrassing the Paymaster General, I do not mind disclosing that, since the difficult days when I fought the Bristol, South constituency and it fought back to such good effect, I have come increasingly to both like and respect her. The hon. Lady therefore knows where I am starting from: I like and respect her very much and I think that she is an extremely effective exponent of her case. However, the case is sometimes so poor that it just does not pass muster, and although I admire her professionalism, I cannot say that I was persuaded by her argument.

Dawn Primarolo: Flattery sometimes works, but on this occasion it will not. Despite the hon. Gentleman's eloquence, I am still not minded to accept the amendments. I just thought that I would save him from having to make his speech.

John Bercow: That is a pity. I wondered whether charm would work on this occasion, rather than aggression, but I have been sadly disappointed at an early stage in my speech. That approach was worth a go, but I shall have to be careful about trying it too often.
 In any event, I was not persuaded by the hon. Lady's argument. She argues on one hand that there will be a great beneficence from the state as it offers financial incentives—some might use the more unflattering, but perhaps more accurate, term ''bribes''—to businesses to comply with the Government's will. On the other hand, she talks about the crucial importance of ensuring 100 per cent. compliance if the savings that she wants and envisages are to be achieved. It seems a peculiar state of affairs that the Government, to secure 100 per cent. compliance and the savings that will result therefrom, judge it necessary in the first instance to lob sums of money at businesses to sweeten the pill of being coerced into doing something that they would otherwise not choose to do. 
 Leaving aside the hon. Lady's arguments so far, I shall not dilate on the additional point—you would be displeased if I did, Mr. Gale—of deadweight costs. If many companies are proposing to comply in any case, 
 it is not sensible for a Treasury Minister to lob money at them like confetti as a bribe. On this occasion, the Treasury brief was less compelling than it might have been. 
 In truth, though, the hon. Lady made the most sensible of her points when she said that she understood the Opposition arguments but simply did not agree with them. In other words, we agree to differ. Rather than rehearse all the arguments again, it would better to agree with her on that. We disagree. The subventions are unnecessary and coercion is undesirable. It would be better to allow a choice. I have listened with interest and respect to the Paymaster General, but I have not been converted. She will be astonished and mortified, but I am compelled to press for a vote. 
Mr. Jack rose—

Roger Gale: I am terribly sorry. I tried to encourage the right hon. Gentleman to intervene earlier on the hon. Member for Buckingham when he was winding up the debate. I shall now put the motion.
 Question put, That the amendment be made:—
The Committee divided: Ayes 9, Noes 18.

Question accordingly negatived.

John Bercow: I beg to move amendment No. 230, in page 105, line 5, at end insert—
'(e) exempt from the provisions of this section any person who is a practising member of a religious society or order the tenets or beliefs of which are incompatible with the use of such means of electronic communications as may be specified in the regulations.'.
 I should now like to continue the argument by dwelling on the amendment, which, as members of the Committee will be aware, was suggested by the Brethren. I stress from the outset that the Brethren are not motivated by considerations of party politics, and are unfailingly courteous and extraordinarily efficient lobbyists. They make a point of putting their case to Members on both sides of the House. They are not partisan in their motivations, as they view their relationship as being with God. Members of the Brethren do not vote in general or other elections. Without lightening or devaluing the importance of our exchanges, I hope that I can be forgiven for arguing that my hon. Friends and I are not motivated by vote-grabbing instincts. 
 I should also stress that there is no requirement for me or, I suspect, any other Opposition Committee member, to declare a registrable interest, because I am not a member of the Brethren. [Laughter.] The Financial Secretary laughs, but it is worth making the point, and from the Brethren's vantage point, it is jolly fortunate that I am not a member. They are upstanding people of high moral fibre, and I do not think that I could reach the standards of behaviour to which they aspire and that they attain in their daily life. They are motivated by principle, and I agreed with and respected the language that the Paymaster General used in an earlier reference to this matter. She did not name the Brethren, but she talked about a minority of people with strong convictions that are different from those of many other people but are entitled to be respected. That is the starting point of the Conservative Opposition. 
 The Brethren suggested that a satisfactory amendment could be made to clause 132 by inserting a subsection (4)(e) that would 
''exempt from the provisions of this section any person who is a practising member of a religious society or order the tenets or beliefs of which are incompatible with the use of such means of electronic communications as may be specified in the regulations.''
 Consistent with my comments about the Brethren's non-partisan motivation, it is typical of them that they should be at pains to emphasise, as they did in a letter to the Paymaster General on 13 June 2002, that they 
''would much prefer the amendment to be tabled as a Government amendment rather than as a cross-party one, even although we are certain that there would be cross-party support for it on account of the fact that it is not a political issue but one of religious conscience.''
 Regrettably, the Government did not want to make such an amendment, and the Brethren have had to use another vehicle to get the issue debated. However, they wanted to anticipate and diffuse political controversy rather than to stoke it up. That is not an argument for their amendment, but it is a commentary on their motives and integrity. 
 The Conservatives can see merit in such a provision. Originating in 1828, the Brethren are a worldwide Christian fellowship and profound believers in Jesus Christ. There are more than 14,000 Brethren in the United Kingdom alone. They have a conscience before God based on the teachings and prophecies of the holy scripture and seek to live a separated life as governed by the Bible. They respect and honour Government as ordained of God, but are of no political persuasion themselves, as has been stressed before. They pray for the Government, Ministers and all who are in authority. 
 For the past 20 years, during the dramatic advancement, to which the Paymaster General properly referred, of IT in the worlds of business and communication, the Brethren have practised a way of life involving the consistent refusal of the use of computers in their businesses and homes. Some prophetic scriptural warnings concerning the present mighty scientific and commercial build-up depicted in great Babylon are given in a variety of references. The Brethren referred me and other Committee members 
 to those in Thessalonians and Revelations, which underpin their determination to resist being caught up in the whirlpool of electronic developments. 
 There are about 1,200 Brethren businesses in the UK. Without computers, they trade, employ staff and pay taxes, so they need to be able to continue to communicate with the Inland Revenue and other tax authorities on paper.

Mark Hendrick: Does the hon. Gentleman know whether the Brethren use telephones? All modern telephones are switched by computers. From my time as both an electronics engineer and a computer scientist, I recall a devout member of the Plymouth Brethren working as an engineer alongside me.

John Bercow: I will not comment on devout engineers or devout anything else who are not personally known to me. I have no reason to doubt the veracity of what the hon. Gentleman says, but I am not aware of the circumstances. He makes a point about the use of telephones. As I understand it, members of the Brethren use the telephone. A constituent of mine, Mr. Wells, has come to see me about various issues of concern to him as a member of the Brethren. Although I do not recall speaking to him on the telephone—[Interruption.] Yes, he does use the telephone. It is not for me or members of the Committee to make a judgment about the rationale behind or the purity of the practices of members of the Brethren. It is not for me to set myself up as the legitimate and proper umpire of the way that they conduct their affairs. They are much better informed about the reasons for conducting their affairs as they do.

Mark Hendrick: Will the hon. Gentleman give way?

John Bercow: I will give way to the hon. Gentleman once more because I am an indulgent fellow, but after that I want to develop the argument.

Mark Hendrick: I would not wish to pass judgment or to act as an umpire. I merely wish to understand the principles on which the Brethren operate in order to take a fair and just decision.

John Bercow: Well, I will give an example. The hon. Gentleman will have to make do with it. Members of the Brethren would argue that the use of the telephone is qualitatively different from the use of the internet. Using the telephone involves a decision made by an individual who wishes to communicate with another individual. It does not involve the person using the telephone receiving information, images, pictures or depictions that he or she does not wish to receive. It is at least arguable that the difference lies in the fact that the Brethren regard the internet as a source of uncontrollable evil. They are genuinely distressed by much of the traffic on the internet.
 That is a respectable opinion. It may not be the hon. Gentleman's opinion and it might not be mine. Do I tolerate such an opinion? No, I respect it. I respect the sincerity of this minority. The hon. Gentleman has a laudable track record of standing up for minorities, as do most Labour Members. The 
 Paymaster General has a powerful record for doing so. We are talking about a minority who practise a particular way of life. They are law abiding, have always paid their taxes and want to continue to do so. They simply object to being compelled to pay in a particular way. They have a fair point. 
 Moreover, there is a precedent for an exemption. It is not specifically in this field. Although I referred earlier to the hon. Lady's correspondence with her right hon. Friend the Member for Leicester, West in September 2000, about which she is rather embarrassed, on this occasion I refer to the precedent in section 42 of the Criminal Justice and Public Order Act 1994 under which the Brethren sought and were granted an exemption from jury service because of their religious views. The idea is not new. The precedent for granting different treatment to a particular minority in deference to the strongly held convictions of members of that minority is well established. I personally think that it is reasonable. 
 I do not want to engage in a philosophical discussion, Mr. Gale, as you will get jumpy if I do, but I rather subscribe to the approach of John Stuart Mill on these matters. I would invoke the harm principle and say that members of this minority are not inflicting harm on anyone else if they are granted a derogation or an exemption from this rather burdensome requirement. The Brethren are concerned that the clause is a violation of their human rights. I believe that they refer to the principle of equal treatment of taxpayers, as set out in the taxpayers charter. They believe that the principles of the taxpayers charter in respect of equal treatment are not reflected in the clause if it differentially and adversely affects them because of their principles. When they are perfectly willing to pay their taxes and have always done so, the charter is in practice, if not by design, being breached. 
 The Brethren wish to stick to the position that they much admired, which was set out by the Paymaster General in her letter to her right hon. Friend the Member for Leicester, West in September 2000. They felt that there was much to commend that. I know that Mr. Ron Davis, Mr. Bruce Robertson, Mr. Tom Kendall and Mr. Colin Davies in their letter to the Paymaster General of 25 May went so far as to say to her: 
''You wrote a very helpful reply on 21 September 2000 . . . Your assurance that it is not Government policy to force people to use the internet was very comforting as was the statement that those who prefer to use paper to communicate with the tax authorities will continue to be able to do so.''
 I would point out to the Paymaster General that that meant a great deal to them. Being told that they can use an intermediary and, in a sense, safeguard their principles because they are not using the internet—I do appeal to the Paymaster General to at least consider this point—does not satisfy them because they feel that they are nominating someone to act on their behalf and engage in a practice of which they disapprove. 
 I hope that the Paymaster General will reconsider and I refer finally to her latest letter on the subject, of 20 June. I found the last paragraph a little odd, and possibly even—I regret to have to say this to her—
 disingenuous. In that final paragraph, the hon. Lady told members of the Brethren: 
''The amendment you propose would permit, but not require, the Government to make regulations including the exemption you seek. For the reasons set out above, I do not believe that the exemption will be necessary, but even if it were, the present drafting of the clause would permit it''
 —that is to say, the Brethren's amendment— 
''to be made in secondary legislation. For these reasons, the Government will not be able to support the amendment you propose.''
Dawn Primarolo indicated assent.

John Bercow: The hon. Lady is nodding enthusiastically from a sedentary position; therefore my challenge to her is simple. Is she saying that the Government do not want to agree to the amendment now, but they will reflect it, preferably word for word, in the regulations? If that is what she is saying, I would be delighted. My hon. Friends and I would retire home, celebrate and dance around the mulberry bush together. If the Paymaster General is saying that the Government are not going to reflect the amendment in the regulations, what on earth is the point of that little sop in the final paragraph of the letter? It is all very disappointing.
 Our position is that the Brethren are a law-abiding minority and feel very strongly about the matter. No harm will be done by practically accommodating them. I appeal to the Paymaster General to do just that.

John Burnett: I shall not keep the Committee long, but I detect, and I hope that it is not presumptuous of me to say this, that we may get some satisfaction on the amendment. The Paymaster General gently and deftly trespassed on the amendment during the previous debate. In reply to an intervention that I made, she said that in special circumstances for a very few it is possible to vary the mandatory requirement to file information electronically to the Inland Revenue. The way in which the Minister will seek to accommodate us is something that, of course, we are all looking forward to hearing.
 I, too, want to advert to the conscientious and principled objections that the Brethren have to the clause. Like the hon. Member for Buckingham, I have had a brief from them—I believe that they have briefed everyone. It is a sign of the catholic nature of this debate that we shall all, including Government Members, have had an opportunity to consider carefully the matters that the Brethren have drawn to our attention. 
 The Brethren base their creed on their view and interpretation of the teachings and prophecy in the scriptures. This is no new principle: it has been constant, throughout the 20 years that have seen the dramatic advance of information technology. During that period, the Brethren have practised a way of life involving a refusal to use computers in their homes and businesses. They believe that the internet is uncontrollable and a source of evil. Obviously, we do not all share that view—very few in this Committee probably do—but we are all here to protect minorities, including conscientious minorities such as the Brethren. 
 There are approximately 1,200 Brethren businesses in the United Kingdom. They trade, employ staff and pay taxes without computers. They need to be able to continue to communicate with the Inland Revenue and other tax authorities using paper. Unless a conscience provision is included in the clause, there is clearly no framework to allow for the protection of those with principled objections to it. A conscience clause, as is proposed, is not unprecedented. I believe that the proposal is modelled on the jury exemption clause in the Criminal Justice and Public Order Act 1994. There are other conscience exemptions in statute law. I refer the Committee to regulations that allow Sikhs exemption from the use of protective helmets on motor cycles and building sites. I also refer Members to the Oaths Act 1978, which allows alternative provision for affirmation. 
 We should have, and should promote in this Committee, a tolerant society that respects minorities. We should not ride roughshod over the principled and constant views of a substantial group of our fellow citizens. I very much hope that the Minister will accept the amendment.

Tom Harris: I have some sympathy with the spirit of the amendment. I hope that this will be the first and last time that I say this, but I agree with a great deal of what the hon. Member for Buckingham said in his earlier remarks, although I am not quite ready to dance round a mulberry bush with him.
 For the record, although the Brethren have been described in the press in the past week as a sect, they are absolutely not to be described in that way. They are a completely legitimate branch of the Protestant Christian Church. I spent some time in my earlier life as an evangelical Christian. The phrase ''misspent youth'' can be fully understood and appreciated only by someone who has spent 10 years of their life, from the age of 16, as an evangelical Christian. However, one of the legacies that that left me with is a somewhat improved knowledge and understanding of holy scripture. I was intrigued to see some of the references with which the Brethren provided us. 
 It is a Christian prerogative to use the Bible and scripture to justify various social and even political opinions. The Jehovah's Witnesses, for example, believe that they should not take part in any kind of political activity, including voting. It is something of an un-Christian joy for me, during general elections, to canvass the doors of Jehovah's Witnesses, as revenge for the number of times that they have chapped me up on Saturday mornings, just to ask them whether they intend to vote, and their answer is the same as the one that I always give them: no. 
 I was sceptical when I was contacted by the Brethren, so I did my research into the passages that they presented to me: Thessalonians chapter 2, and five references to Revelations. I admit that I looked in my Bible with some trepidation. I was quite excited at the thought that the Lord had decided that the 
 Microsoft empire was not to his liking. I was dying to find out some justification for any suspicion of Bill Gates. I was disappointed that Apple Macintosh was not the preferred platform of the apostles.

Kevin Brennan: Is my hon. Friend aware that to justify their actions the Rebecca rioters in Wales used the quotation from scriptures that people should tear down the gates of the oppressors? Perhaps that is the reference that he has been searching for.

Tom Harris: I am grateful, in a way, to my hon. Friend and I am sure that in his own world that is quite relevant.
 The Government must be careful. I have some reservations about the specific wording of the amendment. Although the amendment and its wording were specifically used to excuse members of the Brethren from jury duty, I have some concerns that if the wording is used in a Finance Bill—although intended as an exception—it could turn into a loophole that may be exploited by some who are more cynical and less principled than the Brethren.

John Burnett: I think that the Paymaster General has said that some 94 per cent. of people already communicate with the Revenue through the internet.

Tom Harris: I think that the hon. Gentleman is correct, but I do not want to go over old arguments that have been made by previous speakers in the debate. Whether we agree with the principles or not, I would hope that the Government show some sort of understanding of and sensitivity to the fact that members of the Brethren are completely principled and have genuine beliefs. They do not intend to avoid their commitment to the Government in terms of paying taxes or filing returns. I hope that the Government recognise that any reservations that they have about the way in which they do that should be dealt with in the Bill, and perhaps in the Committee today.
 Personal religious conviction must be respected, even when there is disagreement on such matters. The evidence, as the hon. Member for Buckingham has said, is that members of the Brethren are exemplary in the running of their business affairs, not least because they understand that they and their faith would be judged by others if anything else were the case. They are diligent in paying their taxes. When the Paymaster General replies, I should like to hear an explanation to address the fears that the Brethren have that not only will their PAYE returns have to be carried out over the internet, but any further communication might have to take place by e-mail instead of the usual methods of telephone or mail. I hope that the Government will address that concern. 
 I hope that the Government will show their customary flexibility on the matter and recognise that such reservations are held in sincerity. Any changes to the clause are being sought by the Brethren for no other reason than a desire to worship God with a clear conscience, and at the same time to pay to Caesar what is Caesar's.

John Pugh: I support the amendment, but I must say that I do not share the convictions of the Brethren. I would go as far as to say that I do not understand their convictions. I understand that the Pope uses a computer and that makes it rather difficult for me to see it as the instrument of the devil. It may not make it quite so difficult for the Brethren to see it in that context.
 I do not really understand how people can have a principle against a specific piece of machinery, but I understand that they do. Quakers have real difficulties with pieces of military machinery, and certain orthodox Jews object to cameras. I think that we have to accept that there is an element of diversity that none of us can explain or find a rationale for. However, this is a case of coercing people to act against their convictions. Were their religious convictions such that they refused to pay tax at all—a sect set up on that basis would be very popular—the Government would have to overrule them. The hon. Member for Buckingham presents a very strong argument: who essentially loses if we make an exception? The people who I think are the losers—the hon. Gentleman has already identified them—are the bureaucrats, who seem to be the winners in the legislation as a whole. There exists a satisfactory alternative technology to computers called pen and paper. It is more secure, more reliable and has withstood the test of time. 
 However, the Government are in a dilemma. They can go down one route and accept the amendment, which is not perfectly worded and which may create problems. They can accept specific nominated groups but, as has been mentioned, other people may abuse any loopholes that are allowed. Rather than deal with that, the Government can take a simpler route, which has been telegraphed all day. They can abandon compulsion and rely on incentives—there is no point in using incentives if there is compulsion—and simply move away from mandatory e-filing. Such a course would not generate insoluble problems for the Government.

Dawn Primarolo: I can be very brief. I do not intend to go over the debate on amendments on which we have voted, and the importance of e-filing. I am sure that hon. Members will want to return to that. I also do not want to comment specifically on the Christian Brethren but accept the points that have been made this afternoon about them. I am a little saddened that my word as a Minister before the Committee and in writing has not been taken with the same charity as views that are slightly different. Hon. Members who have contributed to the debate have rightly stressed the need for tolerance, which one would expect in any democratic Parliament.

Jim Cunningham: I understand the difficulties with the amendment for reasons of precedent, but I have had some correspondence with the Paymaster General regarding the plight in which the Brethren find themselves. I know that she does not wish to name the Brethren, but can she give us at least a hint that she will consider their situation?

Dawn Primarolo: Yes, I can give my hon. Friend that undertaking, as I have in correspondence with the Brethren, much of which was quoted today. I find it sad that some people seek to read other meanings in the paragraphs that I wrote. I can say absolutely clearly that we entirely understand the few individuals—it is only a few, compared with the millions of taxpayers—who have expressed their genuinely held religious objections to using electronic communication, even if we do not personally take that view.
 I stress again that the requirement is on employers. It is perfectly possible to arrange to have all the records passed in paper form from the employer to the intermediary; the intermediary would then make the return. As I understand the points that have been made, there are intermediaries who would have religious objections to undertaking e-filing, and that is the point at issue. 
 I would say to the hon. Member for Buckingham, who read out the paragraph, that his amendment is unnecessary. It would give the Government the opportunity—it does not force the Government to do it—to draft regulations that would exclude from electronic filing in circumstances such as those of the Brethren. The Bill already provides for those regulations to be made. The Government are therefore adding nothing, whereas the Committee is putting it slightly more strongly by pressing the Government to consider the option. I ask my hon. Friends to reject the amendment. The officials concerned at the Inland Revenue will have discussions with the Brethren to ensure that the regulations, when drafted, cover the point that they have been making. That was my point in my letter to my right hon. Friend the Member for Leicester, West in the year 2000, and in all the letters that I have since written. I place it on the record today that that is what will happen.

John Bercow: I am sorry if the Paymaster General believes that her integrity has been impugned, because it has not. My point was that the relevant paragraph to which I referred did not reflect what the Government plan to do. For the avoidance of doubt, and given that the hon. Lady implies that she always intended to take account of, and satisfy, the concerns of the Brethren, could subsection (7)(c) be used for that purpose where it refers to making
''different provision for different cases?''
 Is that partly, at least, what the hon. Lady has in mind?

Dawn Primarolo: Yes, I confirm that that would be a sensible hook. It covers a wide area. For example, any change to the construction industry scheme to assist contractors would need specification.
 I do not wish to prolong the proceedings. The Revenue will consider the principle and ensure that these points are covered. The amendment is unnecessary. We already have the relevant power, and will conduct the necessary discussions. The irony is that the negative procedure allows us to do that speedily, which is why PAYE is done in this way. The thing that the hon. Gentleman did not like this 
 morning about the clause provides the flexibility to respond to a group of people, albeit a small one, and to respect their deeply held views. I hope that the hon. Member for Buckingham will withdraw the amendment, and accept that his point will be covered in regulations.

John Bercow: I appreciate what the Paymaster General has just said. I am reluctant to dwell on the point of difference, but I refer to it as there is a difference between us. I do not accept that the negative procedure alone allows for the meeting of grievances, or that the affirmative procedure, which Opposition Members generally prefer as it allows debate, somehow does not allow a person to address them. However, I respect the fact that the Government have chosen to proceed in this way. The result is what matters, not the technique used.
 I am bound to say that I am pleasantly surprised and considerably encouraged by the Paymaster General's remarks, as I hope that members of the Brethren will be. We will keenly attend to the discussions that the hon. Lady and her officials will have with members of the Brethren. She has put it on the record in unmistakable terms that she wants to meet their concern, and I am prepared to take her at her word. She knows that I will probably bestir myself to raise the matter again in future, perhaps at length and with some vigour if I feel that the pledge has been broken. I know that she would not entertain that scenario with any enthusiasm. I shall take her at her word and beg to ask leave to withdraw the amendment. 
Amendment, by leave, withdrawn.

John Bercow: I beg to move amendment No. 232, in page 105, line 44, leave out subsection (9) and insert—
'(9) Regulations under this section shall be made by statutory instrument subject to an affirmative resolution of the House of Commons.'.
 I shall be brief as we have debated these issues at length and I have been a modest participant in that length. The amendment enjoys the support of the Law Society as well as of Opposition Members and would make the regulations subject to an affirmative resolution. When I mix with people who are not involved in politics, I am often conscious that the language of our exchanges is almost entirely impenetrable to those outside the political system. That makes it necessary to explain the difference between negative and affirmative procedures for dealing with statutory instruments. 
 The negative procedure effectively denies debate. It just happens when the House has already taken a view about a Bill. Matters of great detail and potential controversy can end up being covered in regulations that the House has never debated, although the negative procedure can be taken more quickly. The affirmative procedure allows the House to debate the issues and reach a view on them. 
 My hon. Friends and I believe that both the controversy about this part of the Bill and the scope 
 of the regulations make the affirmative procedure appropriate. These matters should be subject to proper debate and parliamentary scrutiny. That is the Opposition view that underpins the amendment. If necessary, I shall invite my right hon. and hon. Friends to support it in a Division.

John Burnett: We support this amendment. It is important to have an opportunity to debate these matters so that any errors can be corrected. After all, Governments are not infallible. We can see that in our proceedings almost every day. The amendment is worth while. Let us have matters in the open and properly debated.

Michael Jack: I rise to explain my views and put on record the fact that the amendment has been proposed to make the provision work properly in practical terms. The Paymaster General suggested that her word as a Minister was not taken with the seriousness that she would like. When she winds up debate on the clause, I hope that she will acknowledge the good intentions of Opposition Members who favour modern technology and want the Government to benefit from improved and efficient ways to operate. We want to make the provision work properly.
 As explained in Committee earlier, many serious practical questions surround what the regulations cover. If Parliament is to pass a mandatory requirement into law, we do not want it subjected to further debate and questions because we never had the chance to discuss it properly in the first place. The Government's willingness to consult in greater detail would be helpful. Will the Paymaster General assure us that discussions about the workings of the regulations will take place, particularly with the industry? The regulations say little about what would happen to the system if the current provider of IT services to Inland Revenue were to suffer a major financial failure and a successor company were employed to replace Electronic Data Systems and provide the specialist services necessary to drive the system. We know nothing about that. We need reassurance about consultation. How robust do the Government believe are the systems underpinning what we are asked to accept? They should put that on the record. 
 What we propose is important, because the affirmative resolution would, if necessary, enable a motion of amendment to the motion to agree those regulations to be tabled in such a way that any practical objections could be stated in public, on the record. The negative process would not allow the House of Commons to do that. If we are to make something an absolute requirement on the majority of our citizens, they will want to know that we have debated it properly. 
 I want the Government to conduct a proper consultation exercise on the matter and give the House of Commons the opportunity to review, for one last time, whether the proposal would work in practice.

John Pugh: I think that we have seen enough to know that this little clause is creating quite a problem. Issues of conscience have been aired in the debate this
 afternoon, and issues of commercial security were aired this morning. Issues of competence, concerning some people's ability actually to use the system, have been aired, and I raised the issue of competition. We cannot simply give the measure a fair wind and say, ''Get on with it. We will draw it in only if a problem arises,'' because it needs constant scrutiny. A close eye must be kept on it.
 I want to touch briefly on the issue of competition, which I raised this morning. It is not as though things never go wrong—

Roger Gale: Order. We cannot go over debates that were held this morning. What the hon. Gentleman says must relate directly to the amendment.

John Pugh: It relates specifically to the need for scrutiny. If I may do so, I will illustrate why there is a reason for scrutiny.

Roger Gale: The hon. Gentleman may make the case relating to the amendment that we are debating now. He may not re-rehearse arguments that have already been rehearsed.

John Pugh: I am not presenting the same argument, Mr. Gale. I want to point out that in e-filing in the past, or the use of e-government, the Government's record is not one of undifferentiated success. The e-government portal that they set up, which was designed by Microsoft, excluded non-Windows browsers. More importantly, as far as taxation is concerned, there was a serious problem with digital certification which ruled out lots of equipment that was not the appropriate brand designed by the firm concerned. In this case, it happened to be Microsoft, coincidentally.
 There are important issues regarding e-filing that I want to press home, at the pain of being tedious—[Hon. Members: ''Yes.''] I will be tedious, if necessary. If we commit ourselves to a system that runs the risk of a particular brand of software and a particular brand of computers having pre-eminence in every business enterprise in the country, that has enormous significance for the software accountancy industry and so on. I am simply pleading with the Minister: there will be concerns that this will be an anti-enterprise measure and a drift to technological conformity. 
 This morning, the general line of the Minister suggested that good practice was in place. I agree with that; there is good practice in place, but there is nothing in the Bill to ensure that it stays in place and nothing in what has been said compromises the need for strenuous monitoring. I point to a specific item: if people check the Inland Revenue site at present, and simply look for details of their tax return, they find other things, too, for example, a little notice with ''spin of the day'' from the Government and completely unnecessary details of what is the Government's flavour-of-the-month policy. Why should that be there? It is an issue for us later on; it is the kind of thing that will intrude if things are not constantly monitored. What we ask for is serious and constant monitoring.

Dawn Primarolo: Let us place it on the record and make it absolutely clear that the Inland Revenue's website carries only information for taxpayers on their obligations, and gateways into that information. It does not carry any information that the hon. Gentleman referred to, such as ''spin of the day'' from the Government.
Dr. Pugh rose—

Dawn Primarolo: Just one moment, please. The Inland Revenue operates, under care and management of the tax system, a very strict division and its websites provide precise information to the taxpayer. I have never heard such a misinformed understanding or description of the Inland Revenue's website or of the services offered to taxpayers through that website. It has absolutely nothing to do with affirmative resolutions. If the hon. Gentleman knew anything about the procedure of the House, he would know that affirmative resolutions cannot be amended. They are only accepted or rejected. Regulations under negative resolution are placed before the House for 21 days so that Members and lobbyists can see them.
 The hon. Gentleman also fails to understand that the PAYE system operates on the updating of regulations and has done so under not only this Government but the previous Government. It is an effective way of ensuring that responses are taken on board, regulations are properly drafted and changes can be made to the tax system. Anyone who understood the tax system, the vastness of the work undertaken by the Inland Revenue and the detail of its everyday communication with taxpayers would never make such incorrect statements about its professionalism.

John Pugh: I defer to the Paymaster General on matters of procedure. On matters of brute fact, she can go to the Inland Revenue portal site today—Members can check this later—and she will see a sign about the benefits of skilled migrant workers coming into this country. That has nothing to do with the taxation system, but it is there. Committee members can inspect it for themselves.

Dawn Primarolo: There is nothing on the Inland Revenue website that does not concern tax information, and the hon. Gentleman should apologise for such assertions. The website carries only taxpayer information, as it is required to do.
 On the amendment, I have made the point that the affirmative procedure would not take the hon. Member for Buckingham any further forward. The heart of the assurances that he sought concerned the consultation and discussion. The negative resolution procedure is perfectly reasonable, has always been used and works well, but I accept that it will be necessary for the Inland Revenue to consult representative bodies and software developers about the necessary developments. It is not about an Inland Revenue software system, but about all the providers and designers in the market being able to develop software packages. The discussions with the Inland Revenue will only concern ensuring that the relevant information is supplied in the packages and that they 
 are compliant. It is not as if the Inland Revenue is putting in a huge system. 
 For the Committee's information, the first set of draft regulations will be published in March 2003, and a period of consultation will follow before they are finally tabled. Any Member who is keen to discuss them will be welcome to receive a copy of the draft regulations and comment accordingly on it. In that way, the hon. Member for Buckingham gets consultation and a longer period, which is much better than an affirmative resolution procedure that does not provide for that. Although it is not everything that he wanted, I hope that he will feel that I have met him halfway and that he can withdraw his amendment.

John Bercow: The Paymaster General has offered me half a slice of cake, and it would churlish of me to throw it, crumbs and all, back in her face. I do not agree with her view on the negative procedure, but I agree that the regulations' content, enforceability and acceptability are what really matter.
 I have another reason for not only enthusiasm but perhaps even joy. The Paymaster General referred to the draft regulations that are to be published in March next year, followed by a thorough consultation. The reason why that makes me enthusiastic and perhaps even joyful is that I am sure that the Paymaster General proposes to act in that way because she has taken heed of the title and contents—''Regulations on Small Businesses (Reduction)''—of the ten-minute Bill that I had the great privilege to present on 27 April 1999. As she has followed my lead and been so generous this afternoon, I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn.

Peter Luff: On a point of order, Mr. Gale. In the interests of making progress, I will not move new clause 15. However, I hope that the Paymaster General, who would have responded to that debate, will be prepared to engage in correspondence on the issues that I wanted to raise.

Dawn Primarolo: I am happy to write to the hon. Gentleman to give him chapter and verse on why his new clause is unnecessary.

Roger Gale: Happily, that is not a point of order for the Chair, but the Committee has heard it. I have listened to the debate carefully and am satisfied that the matters arising from clause 132 have been fully discussed.
 The Chairman, being of the opinion that the principle of the clause and any matters arising thereon had been adequately discussed in the course of debate on the amendments proposed thereto, forthwith put the Question, pursuant to Standing Orders Nos. 68 and 89, That the clause stand part of the Bill. 
 Question agreed to. 
 Clause 132 ordered to stand part of the Bill. 
 Clauses 133 and 135 to 140 ordered to stand part of the Bill.

New Clause 21 - Parliamentary visits to eu candidate countries: tax treatment of members' expenses

'(1) This section amends—
(a) section 200 of the Taxes Act 1988 (which treats allowances paid to a Member of Parliament in respect of, among other things, expenses of visiting the national parliament of another member State as not being income for tax purposes), and
(b) section 200ZA of that Act (which makes corresponding provision in relation to members of the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly).
(2) In subsection (3)(b) of section 200, and in paragraph (b) of the definition of ''EU travel expenses'' in subsection (3) of section 200ZA, after ''of another member State'' insert ''or of a candidate country''.
(3) After subsection (3) of each section insert—
''(4) In subsection (3) above ''candidate country'' means Bulgaria, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, the Slovak Republic, Slovenia or Turkey.
(5) The Treasury shall by order made by statutory instrument make such amendments to the definition in subsection (4) above as are necessary to secure that the countries listed are those that are from time to time candidates for membership of the European Union.''.
(4) This section applies in relation to sums paid on or after 1st April 2002.'.—[Dawn Primarolo.]
 Brought up, and read the First time. 
 Motion made, and Question proposed, that the clause be read a Second time. [Dawn Primarolo.]

Howard Flight: We do not oppose the new clause, but I cannot resist pointing out that it simply adds to the number of swan visits that Members of Parliament can make around the European Union. These tend to bring the EU into disrepute because so many such visits are manifestly not about serious politics, but about having a good time.

Dawn Primarolo: The new clause follows the resolution of the House of Commons that was passed in May to extend the range of destinations covered by the House travel scheme to meet the costs of visiting EU institutions or national Parliaments. It follows automatically from the agreement of the House. I should point out that few Parliaments meet at the weekend, and before MPs are entitled to make those trips, they must agree to adhere to the strict rules of the House. Members must apply for the visit and detail who they will meet and when, and what they will discuss. Only when the Fees Office gives clearance is the trip authorised to take place. The hon. Gentleman's point is simply not true. The new clause provides for the proper business of the House.

Chris Grayling: Why do Members of the devolved Assemblies need the right to travel to EU candidate countries?

Dawn Primarolo: Because with some of the candidate countries' structures and devolving of powers—I am thinking of Germany, for example, and the division of powers within its democracy—it is appropriate to provide for that measure within the safeguards that I have explained. If the Fees Office has not sanctioned a visit as legitimate, the new clause will
 not apply and the MP will not have his costs covered. The measure will work perfectly well in relation to the current provisions. I am sure that no member of the Committee wishes to reduce hon. Members' ability to achieve a greater understanding of other countries' Administrations and practices, which they can then use to the benefit of debates in the House.
Question put and agreed to.
 Clause read a Second time, and added to the Bill.

New Clause 6 - Arrangements with respect to payment of corporation tax

'.—(1) After subsection (2)(d) of section 36 of the Finance Act 1998, insert—
''(da) may make provision for members of the group of companies to elect to base this corporation tax payment on the previous year's taxable profits;''.
(2) In section 59E(1) of the Taxes Management Act 1970, at end insert—
''such that for a company:
(a) payment of corporation tax shall be paid in four annual instalments (for the purposes of this subsection the 'Instalment Date');
(b) the corporation tax payable on each of the first, second and third Instalment Dates shall be equal to one quarter of the total corporation tax paid by the company in the immediately preceding year of assessment;
(c) the corporation tax payable on the fourth Instalment Date shall be equal to the aggregate of—
(i) one quarter of the total corporation tax paid by the company in the immediately preceding year of assessment; and
(ii) the difference between the total corporation tax liability of the company concerned for the year of assessment in which the fourth Instalment Date falls and the corporation tax liability of the company in the immediately preceding year of assessment.''.'.—[Mr. Flight.]
 Brought up, and read the First time.

Howard Flight: I beg to move, That the clause be read a Second time.
 We touched on the contents of this new clause earlier. It seeks to give companies the choice of paying their tax instalments based on the previous year's taxable profits, which would greatly reduce the administration and the costs to companies that currently must estimate annual taxable profits five and a half months before the end of the accounting period. Failure to perform a reasonable estimate leads to interest penalties being levied. That means that companies have to calculate their tax liabilities at least three times: once for each of the payments in months seven and 10 of the accounting period and once for all payments after the end of the accounting period. It is an unnecessary burden. The ideal solution would be to make the arrangements similar to those for individuals' payments on accounts, based on the previous year unless reasonable evidence exists to show that it is too high. 
 The regulations are in a statutory instrument, so in a sense this is a probing amendment to raise the point. When we touched on it before, the Minister replied that the rules did not need to be changed because the 
 rate of interest on unpaid tax had been reduced. Although that is true, it does nothing about the cost burden and administrative burden to companies in having to make all those calculations. They need to show that they have calculated their payments on account to the best of their knowledge and belief where lack of evidence leads to penalties. Why should it not be accepted that companies cannot make an accurate payment on account? There are not many other examples of payment on account where the payer has both to estimate what the final liability might be and pay interest if the estimate is incorrect.

Dawn Primarolo: I shall ask the Committee to reject the new clause, which causes further complexity and confusion in the current arrangements for instalments of companies tax and could lead to a loss of cash flow to the Inland Revenue. The clause provides an election for a previous year or current year basis of assessment, but applies only to companies that are within group payment arrangements. Outside group payment arrangements, the method of calculating the quarterly instalments is flawed because it locks companies into paying instalments of a fixed amount by reference to the previous year, even where it may be clear that the current year liability will be much lower than that for the previous year. It would be a distinct disadvantage to the company. Although that is not the intention of the new clause, that is what would happen.
 Complex provisions would be required to deal with accounting periods of differing lengths and the new clause does not provide special rules that would be required to establish payments due on the commencement of activity. The new clause would also increase complexity in the interest regime. It is unlikely that the previous year's liability would have been established with any certainty when payments for the current year became due, and it is not uncommon for a company's liability for one year to be settled before that of the previous year. 
 The other effect of the new clause is to provide some group companies within the instalments regime with a right to elect for either a previous year or a current year basis of quarterly instalment payments. It is not clear why the new clause allows that choice only to companies within group payment arrangements. The effect of offering such a choice would be that companies would opt to pay the lower of the previous and current year, which would have a significant cash-flow effect on Exchequer receipts. More fundamentally, the Government believe that it is right for large companies to pay tax on a current year basis as profits are made. I assume that the new clause was drafted because of companies' concerns about estimating their current year profits accurately. We recognise those concerns, and have already taken steps to help companies, to which the hon. Gentleman referred. Two years ago, we reduced the interest rate on underpaid instalments by 1 per cent. More recently, the Inland Revenue has worked with industry, representative bodies and advisers to produce guidance on the practical application of the instalment system. The guidance clarifies the underlying principles of the regime through detailed 
 examples, and aims to spell out more clearly what can and cannot be reasonably expected of companies. To date, the feedback from those consultations has been positive. 
 The Inland Revenue intends to publish the guidance at the end of July in time for the July payment. The hon. Member for Arundel and South Downs (Mr. Flight) is welcome, as always, to receive the draft guidance and to consider and comment on it before its publication at the end of June, if he so wishes. However, I impress on him that his new clause would make the instalment payments far more complex and difficult for companies. After thorough consultation with those who expressed an interest in this matter, we believe that the guidance has now dealt with the small problem that he seeks to address. I therefore hope that, on this occasion, he will agree to withdraw his new clause. If he is not satisfied, I am sure that he will refer to the matter again when we consider the Finance Bill next year.

Howard Flight: I look forward to receiving the guidance notes, which perhaps represents half a cake. I said that this was a probing amendment. The Paymaster General overstated its complexity as, in essence, it proposes that companies should have the option of incurring the effort of calculating current year, or to use prior year. For medium-sized companies, it is a relatively greater effort to deal with current year. We are pleased that the Treasury realises that current-year calculations are an imposition. Indeed, the imposition of advance payments was one of the many stealth taxes of the past four years. However, half a cake is better than no cake, so I beg to ask leave to withdraw the motion.
 Motion and clause, by leave, withdrawn.

New clause 17 - Stamp duty and OFEX

'.—In each of the following provisions—
(a) subsections (1)(a), (2)(a) and (3)(a) of section 80A Finance Act 1986 (changes in financial institutions),
(b) subsection (3)(a of section 80C Finance Act 1986 (repurchases and stock lending),
(c) subsections (1)(a), (2)(a) and (3)(a) of section 88A Finance Act 1986 (exceptions for intermediaries), and
(d) subsection (3)(a) of section 89AA Finance Act 1986 (exceptions for repurchases and stock lending)
after the words ''an EEA exchange,'' insert ''OFEX (UK)''.'—[Mr. Flight.]
 Brought up, and read the First time.

Howard Flight: I beg to move, That the clause be read a Second time.
 The new clause is designed to exempt from stamp duty the market-making activities of OFEX in line with the market-making activities of the main official list stocks, alternative investment market stocks of the rest of the London market, and any OFEX stocks in Europe. It was an accidental anomaly that OFEX was excluded from the stamp duty exemption regime on market making. Before the Finance Act 1986, market makers on the London exchange benefited from stamp 
 duty exemption and stamp duty reserve tax. For the Finance Act 1997, section 80A was inserted into the Finance Act 1986 to provide an exemption from stamp duty to persons recognised as intermediaries and members of a European economic area exchange where a sale was effected on the exchange. The exemption recognised the important role of intermediaries in providing liquidity to the markets. 
 OFEX was not a significant force when that amendment was made to the Finance Act 1986. However, since that time, the OFEX market has become more important and established as the junior equity market in the UK. It has been authorised by the Financial Services Authority, and has become established as a prescribed market under the Financial Services and Markets Act 2000 and a regulated market under the Criminal Justice Act 1993. It is also anticipated that an order including OFEX may be relevant. The other day, OFEX was a relevant EEA market for the purposes of a Financial Services and Markets Act promotion order. In becoming a prescribed market, OFEX needs to satisfy three tests, including the economic importance of the market test. Currently, OFEX has some 200 companies trading on the market and more than 400 companies have used OFEX. To date, companies on OFEX have raised £1 billion. Of these, 71 transferred from OFEX to AIM or directly on to the official list. Clearly, OFEX is a firmly established regulated market and a junior equity market of increasing importance to the UK. 
 The amount of stamp duty that OFEX currently pays is not great: it paid £260,000 last year. OFEX is concerned that the absence of an exemption will hamper its efforts to develop and grow. It currently has 106 broker dealer members and one specialist as well as 70 corporate advisers. It wants to expand by admitting further specialists. The lack of stamp duty exemption, particularly in comparison with AIM, with which it overlaps and to some extent competes for intermediaries, will be a deterrent to new specialists because of the direct costs of stamp duty on market making. As I said, the specialists are exempt when they trade on AIM. 
 I understand that the leaders of OFEX have had discussions with the Treasury and I look forward to the Minister telling us, as tacitly agreed the other day, that this unfairness will be addressed, if not specifically by our new clause, in one way or another.

Ruth Kelly: I find the hon. Gentleman's arguments persuasive and I shall not repeat them today. I have reflected on the matter and, as he said, the possibility of an exemption has been a subject of correspondence between my officials and OFEX. As he observed, OFEX is established in the marketplace and is regulated as a service company by the Financial Services Authority and under the Financial Service and Markets Act 2000.
 However, we are not convinced that the new clause will achieve the desired result in the most effective way. I am sympathetic to the hon. Gentleman's arguments, 
 but I would recommend that Committee members do not accept the new clause. I intend to table a suitable Government new clause on Report.

Howard Flight: What can I say? I am delighted to hear that. This important issue will be resolved, so I beg to ask leave to withdraw the motion.
 Motion and clause, by leave, withdrawn.

New Clause 24 - Living accommodation provided for employee

'.—(1) Section 145 of the Income and Corporation Taxes Act 1988 (c. 1) is amended as follows.
(2) In subsection (4) insert—
''(d) where employees working in a designated public service industry receive accommodation provided by their employers and can demonstrate that they have a permanent address elsewhere within the United Kingdom;''.
 (3) In subsection (8) at end add—
''(c) the expression 'designated public service industry' includes the provision of public transport and other public carriage services, the provision of healthcare, the provision of education, and any other activity which the Secretary of State may by regulations made by statutory instrument so designate.''.'.—[Chris Grayling.]
 Brought up, and read the First time.

Chris Grayling: I beg to move, That the clause be read a Second time.
 The new clause is a probing one. It arises from a concern of a constituent who is involved in the public carriage business, and highlights an issue that will become an increasing problem for a variety of companies, particularly around London and the south-east, where the cost of living makes it difficult to attract workers in many key industries. My constituent recruited from some distance away a bus driver who came to work in my constituency during the week but returned to his home at weekends. The company provided a room for him during the week and the Inland Revenue assessed him for a substantial benefit in kind. He incurred a substantial tax bill. 
 If companies of essential public importance find it difficult to attract workers from within their own areas, they will be tempted to look further afield for workers. The new clause would modify the rules so that where it was clear that a worker had a proper address somewhere else in the country or could demonstrate title to a property or a substantial lease of a property not to or from a relative, they would be entitled to receive temporary accommodation during part of the working week in a different part of the country without incurring a tax liability. Regulations would have to establish clear guidelines for that to happen, but it would work in much the same way as Members of Parliament receive the additional cost allowance. It would recognise that such people incur additional costs when working away from home. 
 Given the mounting skills and labour shortages in key industries such as health care, education and transport in London and the south-east, I hope that the Government will consider the new clause favourably.

Mark Field: The definition of public service industry is not easy. With only 55 minutes left of our sitting, it might not be the best time to discuss the definition, and we should perhaps come back to it on Report, but how does my hon. Friend define a public service industry? Speaking as another inner-city Member of Parliament, I must say that the public services go beyond simply the public sector to include the private sector, especially shopkeepers, who are the very glue of the community.

Chris Grayling: My hon. Friend makes an important point. The new clause limits the definition of public service industries to
''the provision of public transport and other public carriage services, the provision of healthcare, the provision of education''
 and leaves it open to the Secretary of State's discretion, either on a short or long-term basis, to designate additional industries. 
 I want simply to establish a principle. It seems an anomaly that meeting labour shortages by encouraging people to work away from home for a few days each week will mean that those people can incur a tax liability. I hope that Ministers will take the initiative as a result of this probing new clause to examine the matters in greater detail and perhaps introduce their own proposals later.

Dawn Primarolo: I am grateful for the way in which the hon. Member for Epsom and Ewell (Chris Grayling) introduced his new clause. I have re-examined my notes on the existing tax reliefs and the circumstances in which an employee receiving accommodation would be exempt from the tax. I must be honest and say that, from the brief details that he has put before the Committee, I am at a loss to understand why the problem has arisen. Although his point is general, a particular case has clearly prompted it, and if the hon. Gentleman agrees to send me more details, I shall consider them closely. I can then decide whether the matter concerns only a specific issue regarding his constituent or a wider issue that needs Government attention.
 I would rather not comment further at this stage to save the Committee's time, but I will be interested to receive the details of the hon. Gentleman's constituent's case.

Chris Grayling: I thank the Paymaster General for that assurance. I am glad to hear that she is willing to examine the broad issue and that I have highlighted a shortcoming in the system through my constituent. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 29 - Life insurance: rate of tax on insurance company chargeable gains and treated as paid on policy gains (No. 2)

'.—(1) In subsection (3) of section 88A of the Finance Act 1989 (lower corporation tax rate on certain insurance company profits), after ''as consists of income'', insert ''or gains''.
(2) After subsection (3)(d) of that section, insert—
''(e) chargeable gains.''
(3) This section has effect from 1st April 2002.'.—[Mr. Flight.]
 Brought up, and read the First time.

Howard Flight: I beg to move, That the clause be read a Second time.
 The new clause must be probing because under the Ways and Means resolution requirements, it cannot address the second half of what is required. However, it would address what the Minister would agree has been an anomaly since the Finance Act 1999 by reducing the amount of tax paid by life insurance companies on policyholder capital gains from 22 to 20 per cent. I would like it to make a matching reduction in tax credits for higher-rate taxpayers who receive taxable proceeds from life policies. 
 The new clause would restore equality of tax treatment between those who save through life insurance policies, and those who save directly or through unit trusts. The Finance Act 1999 reduced the rate of capital gains tax paid by basic rate taxpayers from 22 to 20 per cent. without making a matching reduction in the rate of corporation tax paid by insurance companies on investment-backing life insurance saving policies. Few basic rate taxpayers—about one in 250—pay any capital gains tax because of the annual exemption. In contrast, all the 25 million individuals who save through life insurance policies indirectly pay some capital gains tax each year, as life companies have to pay corporation tax on policyholder capital gains with no equivalent to the exemption limit. 
 The amounts in 1999 and 2000 were substantial, which may be one reason why the Government have dragged their feet on dealing with the problem. However, one unforeseen result of the fall in share prices over the past two years, which sadly continues, is that the Exchequer cost of removing the anomaly and the rate differential is now relatively small—some £10 million—compared with the total corporation tax paid by the life insurance companies, which was some £2.7 billion in the last year for which figures are available. 
 I hope that the Paymaster General agrees that this anomaly is unfair and needs correcting. As I pointed out at the beginning, it is necessary to reduce the rate paid by life insurance companies and to reduce the credit from 22 to 20 per cent. for higher-rate taxpayers.

Michael Jack: I support my hon. Friend the Member for Arundel and South Downs, who elegantly summarised the technicalities of the new clause. The Paymaster General may recall that I raised this matter with the Minister for E-Commerce and Competitiveness when he was Financial Secretary in 2000. He did me the courtesy of writing a letter, in which he said that the case for change was not wholly without merit. In the same letter, he confirmed that the cost of the measure, to which my hon. Friend referred, would be some £30 million. I am pleased, or perhaps saddened, that if the Government were minded to introduce the measure, the estimated fall in stock market prices would now be significantly less. It would be interesting to hear their figure.
 With regard to equity and the operation of the i minus e formula in life assurance taxation, the 
 Government have, in fairness, adjusted the personal rates of tax in the composite rate used in qualifying policies to reflect changes in personal taxation. However, the anomaly has remained in capital gains taxation for some time, as my hon. Friend the Member for Arundel and South Downs said. I was equally heartened by a comment made by the then Economic Secretary during the Report stage of the previous Finance Bill that the issue should be kept in mind. The hon. Lady indicated that what she described as a package approach would probably be the best way to address it. I assumed from that that the Government were minded to examine the wider issues relating to life assurance taxation so that the matter could be addressed. To the best of my knowledge, however, such a package has not been forthcoming. As my hon. Friend said, the regular savings of some 25 million people in the UK include some form of life assurance. As we know, there is considerable disquiet among the holders of some policies about whether the companies will deliver the financial result that the policyholders expected. 
 Although saving through life assurance has taken a battering, it should not get such a bad reputation that people do not see it as a tax-effective and personally effective way of saving in the long term. This change would have a modest but beneficial effect on the returns from life assurance policies. I hope that the Government will agree at least to consider it, with a view to making the necessary changes.

Ruth Kelly: The new clause would reduce the rate of tax that life insurance companies and friendly societies paid on the part of their capital gains that would contribute to benefits payable to policyholders. The logic behind the clause is to bring the rate of corporation tax on those gains in line with the rate of tax applied to the capital gains of individuals. There are, however, fundamental differences between the regimes for taxing gains made by companies—especially life companies—and those for taxing the capital gains of individuals. Therefore an attempt to align the corporation tax rate on gains with the rate applying to an individual's gains is too simplistic.
 For example, individuals enjoy taper relief, whereas companies have indexation. Individuals have an annual exempt amount below which gains are not taxed. Life companies can deduct management expenses in computing their liability on chargeable gains, whereas individuals cannot. Life companies can also fund payments to policyholders from incoming premiums without realising assets and therefore making capital gains. That enables companies to defer making taxable gains almost indefinitely and so reduces the effective tax rate that they pay on policyholder gains. 
 The hon. Member for Arundel and South Downs and the right hon. Member for Fylde (Mr. Jack) suggested that there were small savers who had not exhausted their annual exempt amount of capital gains tax liabilities who might lose out as a result of the current regime. Most policyholders benefiting from life assurance policies do not pay any further tax when the policy has been cashed. Instead, the amounts paid by 
 the insurance company in corporation tax are effectively treated as satisfying the tax other than the higher rate tax that would have been paid by the individual if they had held and disposed of the assets personally. For the reasons that I have given, the effective rate of tax paid by life companies on the policyholder profits cannot readily be equated with individual tax rates. That is especially true of chargeable gains, where the life company's significant advantages make a direct comparison difficult. 
 The right hon. and hon. Members also referred to the recent fall in the stock market and suggested that it might not be that expensive for the Exchequer to consider making this particular move at this time. However, the Inland Revenue's cost estimate of the new clause is £55 million. It is not easy to make such an estimate, but that is its best estimate of the total cost. Clearly, in years when the stock market has fallen quite sharply, the cost is reduced, but we cannot base estimates of the cost on past performance of the stock market. We have to consider its future performance when making such estimates. The gains and losses realised by a life company in a particular year need not be those that have accrued in the year, so any estimate could be quite wide of the mark. 
 Another matter is relevant to consideration of this issue. We said in the Budget that a consultative document on reforms of the corporation tax system would be issued in the summer. One issue that it covers will be future treatment of capital gains made by companies. The question of what rate of tax should be charged on gains made by life insurance companies will naturally arise during those consultations, so it would be premature to consider that in isolation now.

Michael Jack: I am grateful for the Minister's response. Would she now, or in correspondence, refresh my memory as to when the current rate of capital gains tax in i minus e was set, when it was last changed and what was the logic of that change?

Ruth Kelly: I shall certainly deal with the right hon. Gentleman's points through correspondence. I did not say that there was no case for looking at this issue. I said that it should be considered during the wider consultation on the corporation tax regime. That paper will be issued this summer. For those reasons, I suggest that the hon. Member for Arundel and South Downs consider withdrawing the motion and new clause, otherwise I shall have to advise my hon. Friends to reject it.

Howard Flight: We raised this matter during the debate on the Finance Bill in the year 2000 and the Government treated it reasonably sympathetically. They said that it had some merit and that they would look at it. We are now two years on. I was glad to hear what I took the Minister to be saying, which was that the issue would be looked at during the consultation on the reform of the corporation tax system and insurance company taxation system. I cannot entirely agree that it is that complex an issue to resolve.
 As to cost, the figure that the Minister quoted, which is very different from that worked out by the Association of British Insurers, may not have taken 
 account of the other part of the proposal that could not be in the new clause. Those paying higher rate tax should have another 20 per cent. and not another 18 per cent. to pay. Both adjustments are needed. It seems genuinely wrong that saving via insurance should be tax disadvantaged for the great majority of people by having a 22 per cent. rather than a 20 per cent. rate. I hope that what the Minister had to say to a fair extent tacitly accepts that. It will therefore be addressed as part of the overall package. I beg to ask leave to withdraw the motion. 
 Motion and clause, by leave, withdrawn.

New Clause 30 - Principal private residence exempt from IHT

'. After section 6(3) of the Inheritance Taxes Act 1984 (c. 51) insert—
''(3A) A person's principal private residence is excluded property.''.'.—[Mr. Hoban.]
 Brought up, and read the First time.

Mark Hoban: I beg to move, That the clause be read a Second time.
 At the outset, may I just say that, due to the timing of the tabling of the new clause, I was unable to table the other part of the clause, which reduced the inheritance tax threshold? That brings a sigh of relief from the Minister. I am not so cavalier with the Government's finances as to suggest that we leave the threshold unchanged. I am conscious that there was a fairly lengthy debate on Thursday afternoon on inheritance tax and I have read much of it. One of the issues was indexation of the threshold. I am suggesting another way of getting around the issue by exempting a principal private residence from the scope of inheritance tax. 
 We have spoken at length about the way in which house price inflation has made people's homes the principal part of their estate, particularly for those with a relatively modest income but a relatively high asset base. It strikes me as unfair that the beneficiaries of a will should have to pay tax on the increase in the value of the property. That is beyond their control and also beyond the control of the person who bequeathed them the house. The exemption is important for another reason. Several of the issues that we face today about people saving for their retirement and the growing period over which mortgages can be repaid can be traced back to the increase in house prices. Because house prices have risen so much, people have taken out longer mortgages. The daughter of one of my constituents has taken out a 35-year mortgage, which causes me no end of concern. It shows what people on modest incomes need to do to buy houses in expensive areas. 
 We also referred during Treasury questions last week to the fall in the savings ratio. One reason why it is falling is that people are putting more money into their mortgages, partly because they have to spend more on their mortgage simply to acquire a house that they feel is appropriate for their family. Exempting the principal private property from inheritance tax will encourage intergenerational transfers so that children can benefit from the capital that their parents have 
 built up to repay some of those mortgages over long repayment periods. They will also find their savings augmented by the proceeds of the sale of the house, which will be free of inheritance tax. It is a relatively simple measure that addresses several issues that people experience as a consequence of high house prices.

Ruth Kelly: I am relieved that the hon. Member for Fareham (Mr. Hoban) intended to accompany his new clause with a reduction in the threshold at which inheritance tax would apply. His new clause would be extremely costly to the Exchequer. I understand that the estimated cost would be around £950 million every year and it is with some relief that I understand that the hon. Gentleman does not intend the Exchequer to bear that cost and that he would seek to compensate by lowering the threshold.
 Cost is only one factor in this debate. Perhaps the main objection to the new clause is that it would be profoundly unfair. When we considered clause 115 last week, hon. Members were keen to ask profound questions about the philosophy behind inheritance tax and the threshold. I am not going to be drawn into that or to rehearse those previous arguments, but, like our predecessors, we are all concerned about fairness, and particularly horizontal equity, so that people in broadly similar circumstances face broadly similar tax bills and not large differences in liability for reasons unconnected with their capacity to pay. The new clause runs flatly counter to that principle. 
 Every member of the Committee is aware that house prices have recently risen sharply, and we also know that there have been large regional variations. I am sure that hon. Members are aware of figures from the Land Registry showing that the average price of a detached property in the north-west is just over £139,000, whereas a similar property in Hampshire would cost £246,000. Under the new clause, someone in Hampshire would pay no tax if he or she owned property worth just under £500,000 and happened to live in that county's average-priced detached property, whereas someone in the north-west at the same place on the housing ladder and with the same total wealth would pay around £45,000. That does not seem fair. 
 I could go on about other aspects of the new clause that strike me as unfair, but for the Committee's sake, I want to make progress. I want to point out the practicalities of introducing a relief that would encourage people to buy the most expensive house irrespective of their needs. That is precisely what the housing market does not need at the moment. 
 Recent house prices rises have resulted in some sharp changes in people's ideas of where they stand in the wealth pecking order and people take time to adjust to that new state of affairs. They can be assured that my right hon. Friend the Chancellor will look carefully, as he always does and always has done, at the new pattern of assets when setting the IHT threshold each year and make adjustments as and when necessary. I do not believe that there is any call to make vast structural changes to IHT to accommodate passing movements in asset prices, and 
 particularly not to single out a particular asset price if such a change would be unfair and counter-productive.

Mark Field: It is accepted that the principle private residence is exempt from another property tax—capital gains tax—so what is the rationale for not making a similar exemption from inheritance tax for the same asset?

Ruth Kelly: The hon. Gentleman is trying to draw me into the philosophy behind inheritance tax, which we debated at great length at our previous sitting. Suffice it to say that such a tax would not be fair. It would strike people in similar tax circumstances and with similar wealth differently in different parts of the country. It would be hugely expensive unless it were accompanied by a reduction in the inheritance tax threshold to, I believe, around £130,000. For those reasons, I urge hon. Members on both sides of the Committee to reject the amendment.

Mark Hoban: I am grateful to the Paymaster General for her reply, but picking her up on that final point, I was not over-generous in the draft amendment that was not tabled; I suggested that the threshold should go down to £100,000. That would therefore have been tax generating—which, I must say, I regret.
 This was very much a probing new clause, but it concerns an important issue for many people on a relatively modest income who have a large proportion of their estate tied up in property. It was important to air that issue. I suspect that we shall have to return to it in later years if we see a continuing increase in property prices across the country. I beg to ask leave to withdraw the motion. 
Motion and clause, by leave, withdrawn.New Clause 32Costs of residential care (No. 2)

New Clause 32 - Costs of residential care (No. 2)

''.—(1) The income for a year of assessment of an individual who in that year—
(a) is in need of residential care,
(b) receives such care, and
(c) pays for it himself,
shall, subject to subsection (2), be treated as reduced by 50 per cent. of the amount of the payment.
(2) The amount by which an individual's liability to income tax for a year of assessment is reduced under this section shall not exceed the amount by which it would be reduced if the higher rate of income tax for that year were the same as the basic rate.''.—[Chris Grayling.]
 Brought up, and read the First time.

Chris Grayling: I beg to move, That the clause be read a Second time.
 I should like to try to take advantage of some of the finance just mentioned by my hon. Friend the Member for Fareham in his new clause. This new clause is designed to drive to the heart of what I believe remains one of the most significant problems for the elderly in our society, namely, the financing and support of those in residential care. At the moment, elderly people who go into residential or nursing care initially pay for themselves. They do so, first, out of their income and, secondly, out of the sale of their assets. Thirdly, when 
 they get down to a relatively low threshold, the state takes over and pays the bill. 
 The reality is that someone living off, perhaps, income from a not terribly substantial old age pension and some savings income pays tax to the Government before paying for the cost of his or her residential care. I think that that is wrong. It is wrong in principle because it makes it more difficult for those people to pay their way. It is also wrong from the point of view of the Government because it brings sooner the date on which the Government take over responsibility for paying. 
 It also gives rise to an iniquity that, I know, causes huge frustration to elderly people around the country. Hon. Members on both sides of the Committee must have experienced knocking on the doors of people, at election time or in between, who say that they feel deeply frustrated because they have saved all their lives, put some money aside for old age and bought and own their own home, but are expected to pay for their residential and nursing care themselves, whereas, by contrast, those who have not made provision for themselves have the state pick up the Bill. On numerous occasions, people have expressed to me frustration that they are not able to leave property to the next generation or make adequate provision for themselves because of this system. 
 It seems to me that one way of tackling that—at a cost, and I shall be interested to compare my figures on the cost to the Minister's—would be to change the approach to create a fairer environment for those paying for their own residential and nursing care. This would, I think, benefit the Government financially as well as costing them financially. My proposal is that an individual paying the cost of residential and nursing care should be able to offset 50 per cent. of the cost of that care against basic rate taxation. I have picked 50 per cent. because inevitably in retirement, whether or not one is in a residential home, one has costs—the general costs of living and buying food. It is right and proper that the state should expect a decent contribution towards the cost of residential and nursing care from those able to make it. However, providing tax relief on 50 per cent. of that cost reflects the fact that, when one goes into a residential or nursing care environment, one acquires an extra raft of costs arising from one's dependency on others and inability to fend for oneself. Those are costs that one would not otherwise incur. 
 If we say to those people, ''We accept that you have limited means and are paying out most, if not all, of your pension income and drawing substantially on savings and the value of your house to pay for this, so we will allow you to offset half that cost against income tax as a relief,'' that would not be a significant expense in the gamut of public expenditure. My betting is that it would cost somewhat less than £100 million to achieve, and I will tell the Paymaster General how I reached that figure. The Government would get much of that money back through the reduction in costs for the state by meeting the costs of those people in residential care at an earlier date than would otherwise be the case. 
 Let me conclude by telling the Paymaster General how much I think that that would cost. There are 42,700 people in this country currently paying for their own residential and nursing care. Allowing an estimated annual cost of £24,000 a year for those people, they are paying a total of just over £1 billion a year. If one allows them basic rate tax relief on half that, the cost would be just over £112 million—if one assumes it is entirely at income rather than savings rates of taxation. By the time one takes into account the fact that considerable parts of that will come from savings rates of taxation, which are lower, the sum would be less than £100 million. 
 I believe that much of that money would be recouped through reduced costs to social services and the Government of funding those people at a later date. I do not believe that ultimately the cost is anything like that total, but I think that the gesture that the Government would make to those elderly people in adopting that approach would be such as to make it well worth while, socially as well as financially.

Dawn Primarolo: This is an interesting turn of events towards the end of the Committee stage of the Finance Bill. The hon. Member for Fareham seeks to raise the money in his new clause, and his hon. Friend the Member for Epsom and Ewell seeks to spend it in the subsequent new clause, taking the idea of Government-in-waiting beyond normal expectations.
 Our costings come to about £200 million, based on average fees, annual costs and the number of individuals concerned. That is not a small amount of money, but it is not just a question of the cost. It is a question of the principle and how the Government approach the provision for those who require residential care. The new clause, which I will ask my hon. Friends to oppose should the hon. Gentleman decide to put it to a vote, would benefit only those who are paying for their care. The principle for charging for care is not new. Indeed, I seem to remember that the Conservatives were quite keen on advocating payments for care. Where appropriate, it is not unreasonable to expect that people should pay some contribution. They pay the full cost only if their capital is worth more than £16,000 a year.

Chris Grayling: In total.

Dawn Primarolo: Yes, £16,000 in total. In many cases, however, the cost of those in residential care has already been met by local authorities. The Government have made it clear that we are committed to providing a wide range and greater volume of high-quality services in response to people's needs. We are pursuing policies that will allow people to remain in their homes, which many people want to do. When they do go into residential care, Government policy has been that there should be a system of charges that is fair to the residents of the care homes, and those who care for them.
 Changes were introduced last year that have been financially beneficial to a great number of the residents to whom the hon. Member for Epsom and Ewell is directing his attention. Those followed on from the recommendations of the royal commission for long-term care. The Government have implemented several 
 of those changes in the residential care charge system. They give residents more options as to how they pay for their care, and have ended the unfair system whereby nursing care was free in some settings but not others. The funding for local authorities for the provision of personal social services has increased, on average, by 3 per cent. a year in real terms during the period from 1996–97 to 2002–03. From 2003–04 to 2005–06, it will increase by 6 per cent. a year in real terms. That is £3 billion of new money, invested in a way that I think is a far better use of resources, particularly given that so many people desire to remain in their own homes and be supported there. 
 This is about choice and how the money is spent. Even compared with the hon. Gentleman's options, it is a very substantial amount of money. Given the desire to provide for a number of options, including remaining in one's own home, I suggest to the hon. Gentleman that the money is far better spent in the way that the Government intend to invest it, which is to offer those wider options and support people in the home, having made the changes already to the system of care charges. 
 Obviously, this is an important policy area and the Government continue to look at it closely—not the Treasury, but other relevant Departments. I hope that the hon. Gentleman will feel that, although he has made his case, he does not wish to press his new clause at this stage. If he does, I shall have to ask my hon. Friends to oppose it.

Chris Grayling: I am unconvinced by the Paymaster General's argument, but I was not really expecting to be convinced by it. My proposal would be a substantial tax cut for those who have made provision for old age, and would be extremely popular, especially in the residential care home sector, which I do not think has received anything like the attention from the Government that it deserves and has hoped for. Given the Government's failure to live up to the suggestions made in the royal commission's report, the proposal would add significantly to the process of alleviating the financial pressures for those in such homes.
 That said, time is running on and I do not intend to press the matter to a vote. I hope that the point has been made, and I beg to ask leave to withdraw the motion. 
 Motion and clause, by leave, withdrawn.

New Clause 33 - IHT and executors

''. In subsection (2) of section 226 of the Inheritance Tax Act 1984, at end add—
'Personal representatives may pay the tax out of the estate remaining after death before probate has been granted.'.''.—[Mr. Flight.]
 Brought up, and read the First time. 
Mr. Flight: I beg to move, That the clause be read a Second time.
 While we are dealing with death and approaching death, let me say that there is often a problem in the way that probate works in that nothing can be paid out of the estate until the inheritance tax has been settled, but people often cannot afford to pay inheritance tax until the estate is distributed. That usually leads to them having to borrow money to pay their inheritance tax, repaying the loan once probate is granted. 
 This is really a probing new clause, to point out that that is how the matter often operates and ask whether there is any particular reason for the existing requirements, or whether it is just a historic anomaly. The new clause would enable personal representatives to pay inheritance tax out of the estate remaining after death and before probate is granted.

Ruth Kelly: I thank the hon. Member for Arundel and South Downs for the constructive manner in which he has put his proposal and raised the issues. I accept that there is a case here, but there is a problem with the new clause, which I do not think actually deals with the issue in point. Although it states what executors can use, it does not oblige anyone else to let them have it. The issue is not just about tax law, but is a matter of the general law surrounding the administration of estates. It is not something that we can change at a stroke through amending the Inheritance Tax Act 1984.
 That said, I think that the Committee will understand that we are interested in resolving those issues. We are working on them in close consultation with bank and building society representative bodies. The key is to address the concerns that such third parties have about releasing assets before they can be assured that the would-be executors have the authority, in the form of a completed grant of probate, to direct what should be done with them. We think that that can be done through an arrangement that asks banks and other deposit takers to release funds only if they go directly to an Inland Revenue account to pay inheritance tax. That would cover the intermediary against potential exposure to paying out a second time in the unlikely event that the process goes wrong in some way. 
 The hon. Gentleman will understand that it takes time to negotiate and implement new arrangements with which all concerned can feel comfortable. I hope very much that we can make some concrete announcements before long and I ask the hon. Gentleman to withdraw his new clause.

Howard Flight: This is a very pleasant end to our proceedings. I am delighted to hear that the Government are addressing this practical issue and I hope that it will be resolved before my turn comes. I beg to ask leave to withdraw the motion.
 Motion and clause, by leave, withdrawn.

Schedule 39 - Repeals

Amendments made: No. 222, in page 479, line 2, leave out paragraph (c) and insert— 
 '(c) subsection (8).'. 
 No. 223, in page 481, line 6, at end insert— 
'( ) Computation of profits 
 Short title and chapter 
 Extent of repeal 
 Income and Corporation Taxes Act 1988 (c.1) 
 In section 473(2), the words, '', if the securities were not such as are mentioned in subsection (1)(b) above''. 
 Finance Act 1998 (c.36) 
 Section 44. Schedule 6. 
 Capital Allowances Act 2001 (c.2) 
 In Schedule 2, paragraph 102. 
 1 The repeal in section 473(2) of the Taxes Act 1988 has effect in accordance with section 66(4)(a) of this Act
2 The other repeals have effect in accordance with section 63(6) of and paragraphs 16 and 17 of Schedule 22 to this Act.'
 No. 154, in page 483, line 47, column 2, leave out '17(5)' and insert 
'17—
(a) in sub-paragraph (5),'.
 No. 155, in page 483, line 51, column 2, at end insert— 
'(b) sub-paragraphs (6) and (7).'. 
 No. 156, in page 483, line 52, column 2, leave out '18(4),' and insert 
 '18—
(a) in sub-paragraph (1), the word ''and'' immediately preceding paragraph (b);
(b) in sub-paragraph (4),'.—[Dawn Primarolo.]
 Schedule 39, as amended, agreed to. 
 Question proposed, That the Chairman do report the Bill, except clauses 4, 19, 23, 26 to 29, 87 to 92, 131 and 134, and schedules 1, 5 and 38, as amended, to the House.

Dawn Primarolo: Before we move to the final stages of our consideration of the Bill, I want to put on record my thanks to you and Mr. Benton for guiding us so expertly through our proceedings and ensuring that the Committee made good progress with proper consideration of the Bill. You kept us in good humour while ensuring that the Opposition were precise and Ministers answered their questions.
 I also thank the Clerks, the Hansard writers and the Police Officers for their assistance in ensuring the smooth running of our proceedings during the past weeks. 
 I thank the hon. Members for Christchurch (Mr. Chope) and for Arundel and South Downs for the thorough but good-humoured way in which they pressed the Government. Finance Bills present the Opposition with a huge task and I appreciate the way in which they approached this Bill. The partnership that developed with the Government, who accepted many of the very good points that were made, was facilitated because of the good-humoured way in which our business was conducted. 
 I thank the hon. Member for Buckingham for his occasional visits although we made speedier progress when he was not present. I look forward to seeing him in future. 
 I also thank the Ushers and Door Keepers for their excellent support. 
 I thank Conservative Members who pressed Ministers hard when necessary and were good humoured when it was revealed that their proposals were rather expensive and they continued to want to raise money and spend it at the same time. 
 The Liberal Democrats were occasionally present in the Committee, despite the fact that they claimed on the Floor of the House yesterday that it was important that Bills receive thorough scrutiny. Their contributions to various clauses added to that and I thank them for their tolerance and participation. I appreciate how difficult such matters are. 
 I congratulate my right hon. Friend the Member for Brent, South (Mr. Boateng), who is now the Chief Secretary to the Treasury, and my hon. Friend the Member for Bolton, West (Ruth Kelly), who has been so fantastic on the Bill that during its proceedings she was promoted. I welcome my hon. Friend the Member for Wentworth (John Healey) to what I hope will be many happy years of Finance Bills. 
 I thank all my hon. Friends for their sterling support, patience and perseverance. Finance Bills are important and technical, and their assistance in debating the clauses ensured that those outside this place can read our deliberations and be sure that the right questions have been asked and answered. 
 At the close of what is, I believe, my eighth or, perhaps, ninth Finance Bill, may I say how much I have enjoyed the Bill? I am so pleased that there are at least 12 months before the next one, and I certainly hope that the hon. Member for Arundel and South Downs is not planning to depart this earth in any way whatever before that date.

Howard Flight: I offer my thanks and, on behalf of my colleagues, their thanks to you, Mr. Gale, and to Mr. Benton for your most professional and gracious chairing of our proceedings. We also wish to thank the Police, all the Hansard staff, the Door Keepers, the Ushers and, particularly in my case, the Clerk. I put him to a great deal of trouble, and he has been professional and helpful in guiding me in the nightmare task of trying to get amendments correct. Thank you very much.
 I congratulate and thank the Government team, who take a professional approach to dealing with Finance Bills—I hope that it has not been eight years of Finance Bills. Without indulging in Buckingham flattery, I believe that all of us have very much appreciated the professionalism of the Paymaster General and of the Financial Secretary. I also congratulate the new Economic Secretary, the hon. Member for Wentworth, who got stuck into the Bill incredibly well at the latter stages. 
 I thank all of my colleagues for their support. The Committee has given good scrutiny to 550 pages of 
 enormously complex legislation with good nature throughout. Thank you, everyone.

John Pugh: I would like to say a few words on behalf of my absent colleagues, who have deserted me. It has been a privilege to serve under your chairmanship, Mr. Gale. The proceedings have been an education for me, as I am sure the Paymaster General knows. I have been impressed by the good humour and fair adjudication that we have had from you, Mr. Gale, and from Mr. Benton. I have also been impressed by the scrutiny of the Committee and the skill, expertise and politesse that have been exercised by hon. Members and the ministerial team.
 I wish to finish on a note of absolute sweetness and light, and bury some of my differences with the Paymaster General. She was right in saying that the Inland Revenue portal does not carry Government announcements, but I was right in thinking that stuck 
 right above it and inextricably entwined with it was an announcement from the Government about doctors and red tape. As I discovered in the Committee, the truth is always very complex.

Roger Gale: I thank all members of the Committee for their kind remarks, which I shall most certainly pass on to Mr. Benton. I add my thanks to Mr. Cranmer and Miss Garratty, without whose assistance my job would have been impossible, and I add our collective thanks to the officers and staff of the House for their services. I would also like to thank all members of the Committee for the courtesy and good humour with which they participated in the proceedings. It makes our lives a great deal more enjoyable as well as easy.
 Bill, except clauses 4, 19, 23, 26 to 29, 87 to 92, 131 and 134 and schedules 1, 5 and 38, as amended, to be reported. 
 Committee rose at seven minutes to Seven o'clock.